On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil Action No. 93-cv-01977)
Before: SCIRICA, ROTH and GODBOLD, *fn2 Circuit Judges
The issue on appeal is whether certain Pennsylvania prevailing wage and apprenticeship requirements are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Section(s) 1001-1461. Since oral argument, the same issue was addressed by the United States Supreme Court in California Div. of Labor Standards Enforcement v. Dillingham Construction, N.A., Inc., 117 S. Ct. 832 (1997). Accordingly, we hold ERISA does not preempt Pennsylvania's prevailing wage and apprenticeship requirements insofar as they restrict the payment of apprentice wages to apprentices registered in approved programs. We will reverse.
In 1961, Pennsylvania adopted the Prevailing Wage Act, which provides that "[n]ot less than the prevailing minimum wages . . . shall be paid to all workmen employed on public work." 43 Pa. Cons. Stat. Section(s) 165-5. The purpose of the Act was "to protect workers employed on public projects from substandard wages by insuring that they receive the prevailing minimum wage." Keystone Chapter, Associated Builders and Contractors, Inc. v. Foley, 37 F.3d 945, 950 (3d Cir. 1994)(quoting Lycoming County Nursing Home Assoc., Inc. v. Pennsylvania, 627 A.2d 238, 242 (Pa. Commw. Ct. 1993)), cert. denied, 115 S. Ct. 1393 (1995). The prevailing minimum wage is determined by the Secretary of Labor and Industry, *fn3 who also investigates charges of wage act violations. 43 Pa. Cons. Stat. Section(s) 165-7, 165-11. An intentional violation of the wage act results in the contractor's bar from public contracts for three years. 43 Pa. Cons. Stat. Section(s) 165-11(e). The contractor may also be liable to the Commonwealth for damages for underpayment of wages due under the contract. 43 Pa. Cons. Stat. Section(s) 165-11(f).
Pennsylvania law permits an exception to the mandatory prevailing wage rate for apprentices in approved apprenticeship programs. The Pennsylvania Apprenticeship and Training Act permits the payment of "apprentice wage rates" which may be lower than the prevailing rate minimums. 34 Pa. Code Section(s) 83.5(b)(5)(i) ("The progressively increasing schedule of apprentice wage rates shall be expressed in terms of percentages of the journeyperson hourly rate."). *fn4 To prevent abuses of the apprenticeship system, the Pennsylvania Apprenticeship and Training Act created a State Apprenticeship and Training Council to set standards for apprenticeship programs. *fn5 43 Pa. Cons. Stat. Section(s) 90.3, 90.4.
Ferguson Electric Company contracted with the Schuylkill County Redevelopment Authority to provide electrical work for a public works project. Ferguson used nonunion labor and enrolled its apprentices in an apprenticeship program sponsored by the Keystone Chapter of the Associated Builders and Contractors, an employer's association. Ferguson is a member of the Associated Builders and Contractors, and its apprenticeship program had been approved by the Apprenticeship and Training Council. After Ferguson submitted apprenticeship agreements to the Council for approval in June 1992, its apprentices started working for apprentice wages. But the Council did not approve the agreements until January 1993.
Because Ferguson started paying apprentice wages prior to receiving Council approval, the Pennsylvania Department of Labor and Industry asked the Schuylkill County Redevelopment Authority to withhold its invoice payments. Then, in April 1993, the Department initiated an administrative proceeding against Ferguson under the Prevailing Wage Act for: (1) paying apprentice wages to employees before receiving Council approval; and (2) employing too many apprentices in violation of a state job-site apprentice-to-journeyman ratio rule. The Department sought monetary penalties and a ban on Ferguson's participation in public works projects for three years.
Denying any violation, Ferguson brought this federal action alleging the state officials colluded with the International Brotherhood of Electrical Workers and the Foundation for Fair Contracting to prosecute it and other non-union contractors while ignoring the wage act violations of union contractors, thereby violating Ferguson's due process rights. Ferguson also claimed the Prevailing Wage Act was preempted by ERISA. Ferguson sought damages and injunctive relief that would have prohibited ...